South African postal service on brink of collapse as ‘Day Zero’ looms

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South Africans have been warned that their 232-year-old postal service is just weeks away from collapse, the latest state company in the continent’s most advanced economy struggling to deliver the very service it was set up to provide.

SA Post Office interim chief executive Fathima Gany shocked parliamentarians this week by revealing that the business would run out of cash and be liquidated unless it received a R3.8bn ($214mn) government bailout by the end of next month.

Khusela Sangoni, chair of parliament’s portfolio committee on communications, said that although the problems at the institution were well known, “it’s far more serious than we’d suspected”.

“They dropped a bomb on us by telling us that ‘Day Zero’ would happen within a few weeks,” she told the Financial Times.

The problems at SA Post Office, which first opened its doors in 1792, are the culmination of years of decay. It was placed in a form of bankruptcy protection last year owing R8.7bn to creditors. Its service has also collapsed, and only successfully delivered mail 68 per cent of the time in 2022 due to “delays in mail processing” and “financial challenges”.

Gany told parliament that the organisation had improved since it closed a third of its branches and laid off 4,000 of its 11,000 staff. Yet, she also said it only had “cash reserves up to October”, and business rescue practitioners would be legally obliged to put the Post Office in liquidation unless further finance was forthcoming. 

If not, she warned, all jobs would be lost, operations would cease and SA Post Office’s mandate to provide a service to the public would remain unmet.

Mismanagement and poor planning at state electricity provider Eskom have already condemned South Africa to more than a decade of intermittent blackouts, while exports have plunged due to broken infrastructure at rail and ports provider Transnet.

Anoosh Rooplal, the business rescue practitioner who in effect runs SA Post Office, told the FT that the entity had relied on commitments made last year to give it the R3.8bn it needed.

“The rescue plan we devised relied on what we thought was an in-principle agreement for that funding, which we expected to get six months ago. We’ve submitted the application for the funding to the national treasury, and it’s now in their hands,” he said.

Rooplal said his recent conversations with the government gave him hope that they would offer the support. Without it, South Africa risked becoming one of the few countries in the world not to have a national post service.

Trade unions were scathing about the mistakes that had pushed the institution to the brink. “The whole process has been beyond disastrous,” said Matthew Parks, spokesperson for South Africa’s largest labour federation Cosatu, which represents thousands of postal workers.

“I’m not sure what the business rescue has achieved. They’ve retrenched more than 4,000 workers, so who will be able to provide the services they say they want to keep offering?”

Postal services globally face similar problems, with digital rivals disrupting traditional revenues. Private mail services have grown to fill this gap, although SA Post Office is fighting them in court by arguing that it should retain the monopoly on delivering parcels smaller than 1kg.

Sangoni believed there was still a place for a national post office in South Africa, provided it was properly managed and could work with private companies on ecommerce. The consequences of shutting it down would be “apocalyptic” for poorer communities, she said.

“In rural areas, the Post Office is often a hub for these communities. It’s also where South Africans renew their vehicle licences and it has a monopoly over registered mail. So this is why our committee is pushing the government to provide funding to avoid the doomsday scenario.”

Previously, welfare grants on which more than 20mn South Africans rely were delivered through the Post Office. But this obligation was transferred to a separate state entity last year.